Coyote, Inc. purchased a van for $72,000, with an estimated useful life of 5 yea

Question

Coyote, Inc. purchased a van for $72,000, with an estimated useful life of 5 years and a residual value of $8,000. The company uses the double-declining-balance method of depreciation; however, for year 3 they switch to the straight-line method. There is no change to the estimated useful life or residual value. What is the accumulated depreciation balance at the end of year 4? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.) OA. OB. O c. OD, $51,200 $52,053 $62,669 $58,026

Explanation / Answer

D. $ 58,026

Working:

Step-1:Calculation of depreciation expense for first 2 years under double declining method Straight Line rate = 1/5 = 20% Double declining rate 40% Depreciation Schedule: Year Beginning Book Value Depreciation rate Depreciation Expense Ending Book Value 1        72,000 40%                     28,800      43,200 2        43,200 40%                     17,280      25,920 Step-2:Calculation of depreciation expense after year 2 Book Value at the beginning of Year 3              25,920 Salvage Value 8000 Remaining life 3 Straight Line depreciation = (Cost - Salvage)/Useful Life = (25920-8000)/3 =                 5,973 Step-3:Calculation of Accumulated depreciation for Year 4 Double declining depreciation for first 2 years                     28,800 +      17,280 =      46,080 Straight Line depreciation 2 years after above                       5,973 +         5,973 =      11,947 Accumulated depreciation for year 4      58,027

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